Located west from the entrance, the main attraction in Muddy Town is Bo Wyatt, invitable to Brad's party if the Old Record from Muscle Cave is obtained and played on the record player. The bar here sells the following:

At the right side of the first screen right of the entrance, behind some grass, is a light bag containing a Cocola Cola.

Continuing east will begin a flashback of Brad with his karate students and Dusty. Once this has been completed, continue east to the second area of Muddy Waters. A gap below a tree can be jumped down and transports Brad to Fishman Town.